Management By Objectives (MBO), was first introduced by Peter Drucker in 1954 in his book, The Practice of Management. By 1960s and 1970s, MBO became the no 1 buzzword of management practices and some form of a panacea for management ills. Most importantly, MBO has, for the first time, introduced significant changes to the command-control top down management system practiced at that time.
Not that the Command & Control company system did not have any goals and objectives. It did. Whatever the period of origin, all companies and organizations had goals and even managed processes so that they achieved them. However, MBO framework had managed to slot the goal setting through ‘direction’ for the organization by developing an organizational role and mission statement, specific objectives and action plans for each member in a participative decision making style. Further, MBO established key results and/or performance standards for each objective with periodic measurement/assessment of the status or outcome of the goals and objectives. In setting Goals, MBO adheres to SMART (Specific, Measurable, Achievable, Realistic and Time related) methodology so that the goals are valid.
Nevertheless, today the MBO framework has undergone significant changes from its original ‘driver of change’ outlook to a ‘goal setting and a performance appraisal system’ and then the most recent adaptation being the ‘project management framework’.
Heinz Weighrich and Harold Koonz define MBO as “a comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective and efficient achievement of organizational and individual objectives.” And by its general outlook, MBO is a system aimed at achieving objectives of the organization, facilitating employee participation and making them more committed to the organization. It emphasizes clarity and balancing of organizational objectives and the participation of managers and subordinates with accountability for results.
Originally, MBO was born as a ‘driver of change’ and ‘enabler of corporate mission.’ Hence before explaining what I feel about the concept, it is important to briefly clarify what changes were brought by the MBO process to the then existing command control system.
In the command-control top down management system, organizational objectives are set by the top management and ‘handed down’ for activities/functional silos to achieve them. There was no consultation with the employees in the formulation of objectives. The objectives were often broad, general and organization-wise, rather than silos based. At times they specify an explicit time period (for goal achievement) but no “agreed system of feedback” back to the top management was seen. MBO changed this practice by introducing participatory objective setting by both the employee and the employer through the concept “Cascading Organizational Goals and Objectives.” Goals and objectives were set on all levels -strategic, tactical and operational- specifically. These collated objectives were a result of individual organization-wide member objectives where specific goals for each member has been identified with the input and agreement of each member. An explicit time period is also agreed upon to achieve the set objectives. The process is not complete unless feedback and evaluation is performed so that in the next wave, the process is improved and made more realistic. In setting Goals, MBO adheres to SMART (Specific, Measurable, Achievable, Realistic and Time related) methodology so that the goals are valid. In the command control organizational structure however, SMART was not methodologically applied.
Since its introduction in 1954, MBO concept has come a long way- from its original ‘driver of change’ outlook to a ‘goal setting and a performance appraisal system’ and then the most recent adaptation being the ‘project management...